If you have kids, education is always on our mind. There’s a ton of data that shows that a child who had the benefit of an excellent education, K-12, and went onto get a college degree, had a much better chance of getting a good job and doing well in the future.
The catch is the cost of high quality education. It starts with early childhood education in preschool, possibly a private school for K- 12, and the rising costs of a college degree.
Over the past decade, the average cost of tuition and fees at four-year private colleges and universities have outpaced the rate of inflation by more than 3 percent. That’s a pretty steep rise in the amount you have to provide for your kid to get educated.
One solution is a 529 plan. This plan just got more interesting for people who want to pay for K-12 private school in certain states. New laws have made it possible to use the money saved in a 529 plan for more than originally intended or anticipated.
A 529 plan allows you to save a total of $15,000 every year towards the education of a selected individual. You can withdraw from the account for qualified educational expenses, free of taxes.
Under latest federal law, you can withdraw up to $10,000 to pay for a student’s private K–12 tuition fees. Considering the national average private school tuition is approximately $10,413 per year that’s a pretty sweet deal.
It’s important to note that not all states allow this, so be absolutely sure to do your research and check if it applies to you or else you may have to pay taxes on the money you withdraw.
If you’re planning on making sure your children or grandchildren get the best education possible from their very first day at school right through to graduating from college, a 529 plan could be the answer. It gives you a way to fund their education and take advantage of a federal allowance at the same time.
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